Tag Immobilien Ag U/Adr

Ladies and gentlemen, welcome to the TAG Immobilien publication of Interim Statement 9-month, 2026 conference call. I am Charlie, the chorus call operator. I would like to remind you that all participants will be listened on remote and the conference is being recorded. The presentation will be followed by Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Martin Thiel, CFO and Co-CEO. Please go ahead.

Thanks and good morning all. Thank you for dialing in for our nine-month, 2026 conference call. As always, I will start with the highlights and I'm now on page three of the presentation. I think it's fair to say that the first nine months in 2026 were a quite strong period. Please take a look at our FFO1 development that increased by 12% year on year. Also the EBITDR from the rental business showed a strong growth by 9%. And these good results helped us to increase already today our guidance for the full year 2026 regarding FFO1. But also the sales results in Poland were good. Net income from sales Poland in the first nine months of 2026 came out at 29.6 million compared to 34 million in the previous year and we expect as always in the fourth quarter of this year a strong increase in the results because of more handovers in the fourth quarter. Especially important is that we sold more units in Poland in the first nine months compared to the previous period So more than 2,100 units sold in Poland compared to roughly 1,970 units in the previous period. And in Q3, the sales numbers were more than 800 units compared to roughly 700 units in the quarter before. The Robic IPO is now completed in the third quarter of 2026. So the transaction closed in July 2026. We received cross proceeds in total for a group of 282 million euros. 188 million euros of cross proceeds at target level from the sale of the Wobbic shares. And also Wobbic received a significant cash contribution of around 94 million from the IPO. After the IPO, we own now 67% of Wobbic, so we are still the majority shareholder. The quite strong cash inflow also reduced significantly our LTV. We are now at 42.6%. At the end of the third quarter, there is roughly 300 basis points less than in the previous quarter. And there was also an extremely positive impact on our APRA NTA via the IPO, via the sale of our shares. So we increased the APRA NTA through this transaction by roughly 62 million euros. As always, alongside the Q3 figures, we are providing guidance for the first time for the next financial year, so for 2027. Looking at the FFO1 guidance for financial year 2027, we are indicating further growth. So for the full year 2026, as said, we increased the guidance, and that shows a roughly 9% year-on-year increase. But also in 2027, we expect further increase in our FFO1 by roughly 4%. So the new guidance or the first time issued guidance for financial year 2027 stands now between Euro 200 and 210 million. And this is also driven by quite strong growth in EBITDR from the rental business. So this is expected to grow even more by roughly 8%. between 20 and 25 million but that's not surprising higher financing costs are also kicking in so they said it has a reduced impact on the guidance for 2027 by roughly 10 million. Looking at the guidance on the guidance for our net income from sales Poland and also therefore for the guidance for FFO2 it's important to have in mind that we sold via the IPO shares in OBIC so therefore from next year onwards We are accounting only for 67% of ORBIC's results in our sales business results, so therefore we have naturally a reduced result from Poland, from the sales business there. In total we expect 40% reduction, mainly driven by this reduced stake of our sales results in Poland, and that also leads to a reduction roughly of 9% in FFO2. But perhaps you have already seen this, we expect that 2027 we will have strong sales numbers in our sales business in Poland and therefore from 2028 onwards our net income from sales in Poland, despite the reduced shareholding, should already be on a level which is very similar to 2026. So we have a very short time dilution impact and as said, a very positive impact on the NTE by more than 62 million euros. Let's go to the next page and please allow me some more general comments on TEG and our business and perhaps what makes us different in this environment because we think it's important to point this out again. Basically, there are four main differentiating factors. Firstly, we are still growing our results. As shown today, we have not only increased the guidance for financial year 2026 in terms of FFO1, where we expect now a 9% year-on-year increase, we are also showing further growth in 2027 by another 4%. We are not a net seller in this market. We are a net buyer of residential units. So we are not under pressure to fulfill any disposal programs. We can look for opportunities in the market if we see them and then realize them as shown, for example, last year with the acquisition of the Reziforen portfolio or also with smaller boat on acquisitions that we had in the meanwhile in Germany. Secondly, clearly Poland is a differentiating factor. So we're investing here in one of the fastest growing European economies. If you look at the years and the margins that we achieved with our business there, that should be definitely strong and fits into this interest rate environment. So the new constructed apartments that we built on our own land bank in Poland still show a gross yield between 7% and 8%. The sales business is working very well, still with high margins of around or even above 30% gross margin, and is mostly self-funded due to the payment or due to the ongoing customer prepayments. Poland, therefore, is a clear driver of our growth. As a third factor, if you look more specifically into our German portfolio, the German portfolio has already acquired high yields, so 6.6% gross yield currently, and it offers resilience in the current interest rate environment. Or in other words, with that gross yield, we are still generating a positive cash flow, even if we need to finance somewhere between 4.5% and 5% as of today. By the way, looking a little bit into the year-end valuation, we have, of course, not any final results now, but perhaps you have seen it in the press release already. For the German portfolio, we expect for the full year 2026, a broadly stable valuation, or in other words, to be more precise, a slight loss in the second half of 2026. For the Polish portfolio, the H2 valuation should be more or less unchanged. And as a second element in our German portfolio, just to confirm this once again, we have no Berlin exposure, or to be more precise, a very small Berlin exposure with less than 200 apartments. So despite any press releases that you might have seen in the past that were wrong, we are not affected by any ideas regarding socialization. So there's no Berlin regulatory risk for us. Another fourth element, which is also important for us, our leverage is quite moderate. Now with an LTV of 42.6%, strong cash metrics like the net debt to EBITDR below 10 times and an ICR close to six times. Investment grade ratings have been upgraded in the course of the year, and that puts us into a position where we are able to act, where we can really think about ways to deploy our capital. And that brings us to the next page, page number five. Capital allocation is, of course, a deeply discussed matter in these days. Capital allocation and capital distribution is something that is, of course, in this environment, very important to us. We've got four options, if you simplify it, that are on the table. Growth in the rental business, buying back shares, paying out dividends, Let's start with the last one, the leveraging, because this is for us a kind of framework, something that we think is important in an environment where there's uncertainty around interest rates and therefore also some uncertainty about property valuation. So the leverage ratios that we currently have, that means the LTV target of 45% are not under discussion. So there's not any idea of leveraging up. We think it's important to be here financially strong, and this is a kind of framework where we need to be disciplined. If you look into investments, simplifying it, we've got two options. Firstly, growing in the rental business, or secondly, buying back shares, which is a quasi-investment in our own portfolio. If we think about this, the relevant criteria for us is the net yield that we get out of this investment. That means a purchase price in relation to rental income, less any costs that are associated with the investment or with our own portfolio. That means gross yield, less property management expenses, SG&A, and CapEx need. If you look at it today, Still further growth in the rental business, especially continuing construction rental apartments in Poland on our own land bank still deliver the higher net yield compared to a share buyback. But we can tell you, as the share price has seen a negative performance in the last month, of course, these net yields are as of today closer together. So therefore, we need to monitor the situation and we can assure you that you're really taking such decisions with care. Share buyback could be an alternative option for an investment if you're really convinced that net yields and in other words the mid to long-term growth from that investment is superior to any investment opportunities that we see in the rental business. is that at 50% of FFO1, this is again confirmed for the dividend that we want to pay out for this financial year at the beginning of next year. As of today, we're not planning any script dividend in light of the recent share price development to avoid a more material solution for our shareholders. And also to mention is the sales results that we get from Poland meaning the dividend that Robeck is paying to us as a majority shareholder will be kept in the balance sheet and serves as a basis for example for further investments. But dividend and share buybacks need to be considered as a kind of holistic context or in a holistic context as instruments to provide capital distributions to shareholders. So very happy to discuss and to look into the options in the future Perhaps in a time where we think about potentially increasing the dividend, to also implement share buyback in the future, more in the mid-term, is an instrument of giving back capital to shareholders. So, to sum that up, we are clearly return-driven in terms of our capital allocations. We've got clear guardrails, meaning we want to keep the leverage on the good level that we currently have. were of course fully committed to our rating criteria and to keep the investment great rating. And it's also important in these days with more volatility, with uncertainty around interest rates to take these decisions very carefully. These are kind of longer forward, but let's go more into the details of the nine month results and are now on page number seven. I already mentioned that FFO1 in the first nine months of 2026 showed a quite strong increase. Year to year it was 12%, mostly driven by a stronger contribution from the EBITDR. If you look at the development in the third quarter of 2026, EBITDR from the rental business increased by nearly 6 million. But on the other side, we also had higher increases in the financial costs. Page number eight. gives you some more details on our net income from sales in Poland and of our FFO2. Again, FFO2 also was quite strong, so we had a 7% year-on-year increase. Polish built-to-sale business was lower in the first nine months compared to 2025, but as mentioned in previous calls, it's more important to look at the net income from sales in Poland on a full-year basis So for the fourth quarter of 2026, we expect more handovers and a stronger result. And just to remind you, compared to 2025, we expect in 2026 a quite significant increase in our net income from sales in Poland by almost 40%. Page number nine shows the development of the APRA NTA, which is up 8% year on year. and on top of the positive portfolio relation that we had in the first half, again, the OB IPO contributed to this positive development via an increase of 32 cents per share. Page number 10 shows the finance structure. Our average cost of debt stands in the middle at 2.9%. The LCV, as discussed, is comfortably below the LCV target of 45%. And why do I mention this average cost of debt? So specifically, that's perhaps now good to look at page number 11, if we look into the maturity profile. Of course, financing costs is in these days a burden. We are currently financing between 4.75% and maybe up to 5%, depending on the instrument that we use. And that's higher than the average cost of financing. But if we look at the maturity profile, we also give you the average coupon of the maturities ending each year. In 2027, as you can see in the guidance that we have issued today, clearly we will see a more significant step up. So the 2.5% average cost of debt for maturities in 2027 are assumed to be refinanced roughly 225 basis points higher. But 2028, the refinancing volume is already quite small with 79 million, and 2029 already stands in the average coupon of 4.1%. So that means, yes, 2027 is still a year where higher financing costs are kicking in, but after that, we are not so far away from today's financing level. That means we will not be in a situation where year after year, step by step higher financing costs are kicking in. We've already digested a lot of the higher interest rate environment as of today. Let's go to page number 13, operational performance in the German portfolio and to be very open. Regarding the vacancy development, we expected more at the beginning of the year. So we are now basically at an unchanged vacancy rate of 3.9% compared to the last quarter, where it was 3.8%. We can tell you that we are on a really good way in the fourth quarter. So we're expecting, starting from that 3.9%, a reduction by 30 to 50 basis points until year end. Nevertheless, we will have a slight increase in vacancy rate over the year, but this comes along with better rental growth than originally expected. So we achieved a like-for-like rental growth without any changes in the vacancy rate of 3.1%. And if you look at the bottom right, you can see that the rent increases from existing tenants and tenant turnover without any very material investments are already at 2.8%. Including the monetization surcharge, which contributed another 30 basis points, we are 3.1%, what we call basis-like for like rental growth. And this is, as far as we can see, the strongest number that we ever had in our company. Looking at the Polish rental business, at page number 15, we show the development in the vacancy rate and the rental growth on a like-for-like basis. So please be aware that this is without the newly acquired portfolio that was acquired in May this year and therefore is not included in the like-for-like figures yet. Vacancy rate was basically unchanged compared to the previous period of the year. So in September 2025, the vacancy rate in all units that have been on the market or in the group for more than 12 months was also at 2.4%. Like-for-like rental growth showed a slowdown in the third quarter of 2026. We are now at 1.7% for the full year 2026. We expect now a like-for-like rental growth in Poland between 1.5% and 3%, which is also the assumption for next year. Let me quickly comment this. Of course, we have to work on this, But we are convinced that we really own excellent properties in Poland. We will also see demand in the future. We have to accept that after a very strong growth of rents in the past, rents are now normalizing more and more, so therefore a reduced rental income or rental growth should perhaps not be a big surprise. And secondly, as we've already mentioned in the call last time, we're here working more on longer term contracts for our tenants that perhaps come along with a slightly lower rental growth. But a longer term contract, so a two or three year contract compared to a one year contract, enables us to reduce any tenant churn And tenant churn always comes along with a vacancy of the apartment with a tenant change of perhaps one month or even more. So bottom line, looking at the total rent over the period, for us it's better to reduce a little bit the rents or to put it perhaps better, to give away some of the rent growth, but to make sure that the apartments are rented out for a longer time. Page number 17 now shows the development of the Polish sales business. Again, 2,150 units roughly sold in the first nine months of 2026. If you look at the assumptions for the guidance that we've given in the presentation and in the press release today, for financial year 2026, we expect now a total sales volume or total units sold between 2,900 and 3,100 units. And for the next year, so in 2027, we expect that the number of units sold are increasing quite significantly to 3,700 to 3,900 units. So that should show that we are very confident that this business in Poland is still seeing exceptional demand. Page number 18 shows the units handed over, 1,300 units approximately handed over in the first nine months. but as already mentioned you will see a strong increase in Q4 as nearly always because at year end most handovers are taking place. Yeah, then let's take a quick look as we're finishing on the guidance again. Page 20 shows an overview about the increased guidance in terms of FFO1 for financial year 2026. So the new guidance stands at 195 million to 200 million, which should be an increase of roughly 9% and on a per share basis of 4%. But please be aware this reduced increase on a per share basis is resulting from the fact that the closing of the reservoir end transaction happened later than we expected. So we already increased the capital, our equity last year, So therefore, we had for some months a higher share count and not the full contribution from the portfolio, which is now kicking in. For 2027, again, we expect a further increase by roughly 4% in absolute amounts and also on a per share basis. As already mentioned, the net income from sales in Poland will be lower in 2027. Main reason for that is our reduced shareholding in Robic, where we are now only are owning 67% instead of 100% before, but as already discussed, if we look especially at the expected number of sales for this year and for next year, 2028 should already be a year where our sales results in Poland, even based on a 67% shareholding, should be very similar to the result that we expect for 2026. Finally, 21 shows the FFO1 bridge between 2026 and 2027. If you want to keep it short, the operational performance is quite strong. So the EBITDA is increasing between 20 and 25 million, but this is to some extent affected by higher financing costs of around 10 million euros. Page 22 gives you more assumptions and more details on the guidance. Perhaps not worth going through it in detail, but as an overall comment, our EBITDR, as already mentioned on the previous slide, is expected to grow quite strongly by 12% in 2026 and by 6% in 2027. That's it from my side as an overview of today's results and on the guidance for 2026 and 2027. Many thanks for listening, but of course, I'm now very happy to take your questions.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. You will hear a tone to confirm that you've entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use only handsets while asking a question. Anyone has a question, we press start and run at this time. The first question is from Marios Pasto, Bernstein. Please go ahead.